Malcolm Noonan (Carlow-Kilkenny, Green Party) | Oireachtas source

I am not sure whether the prepared reply I am going to outline will give any further assurances to the Deputy but it is the response of the Department. The VAT treatment of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In accordance with the EU VAT directive, farmers can elect whether to register for VAT in respect of their farming business. Farmers who register for VAT have an entitlement to reclaim VAT on costs incurred in respect of the agricultural business. A farmer who has elected to register for VAT and charges VAT on supplies can claim a deduction for VAT incurred in costs used for the purposes of their taxable supplies. A VAT-registered farmer would be entitled to reclaim VAT incurred on slurry storage bags through his or her VAT returns.

Alternatively, farmers can remain unregistered and opt for the flat-rate farmer scheme. This scheme is a long-standing arrangement under VAT law that allows farmers who remain unregistered for VAT purposes to be compensated on an overall basis for the VAT charged to them on their purchases of goods and services. It allows such farmers to charge and retain a flat-rate addition to the sum they charge for the agricultural goods and services they supply in the course of their farming business. The flat-rate addition is calculated as a percentage of the sum payable to the farmer and is a matter of fact based on commercial agreements between the farmer and the customer. The scheme is designed to reduce the administrative burden for farmers and allows them to remain outside the normal VAT system, thereby avoiding the obligations of registration and returns.

Unregistered farmers may also be able to avail of a VAT refund on certain expenses allowed under their value added tax refund order of 2012. The VAT refund order allows for refunds to be claimed on outlay incurred on the construction of a farm building or structure, on the fencing, draining or reclamation of farmland and on the construction of equipment for the purpose of the microgeneration of electricity for use in the farm business. Revenue has advised, however, that outlay for other purposes such as slurry storage bags does not come within the scope of the refund order.

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